GAO-03-771R Sourcing and Acquisition 

United States General Accounting Office 

Washington, DC 20548 

Comptroller General

of the United States

May 23, 2003 

The Honorable John Ensign 

Chairman 

The Honorable Daniel Akaka 

Ranking Minority Member 

Subcommittee on Readiness and Management Support 

Committee on Armed Services 

United States Senate 

Subject: March 19 Hearing on Sourcing and Acquisition--Questions for the Record

It was a pleasure to appear before the Subcommittee on March 19, 2003, to discuss 

various sourcing and acquisition issues. This letter responds to your request for my 

views on the following questions for the record. 

Q. How would you assess the impact of the reductions in the defense 

acquisition workforce over the last decade? 

Between fiscal years 1990 and 2001, the Department of Defense’s (DOD) acquisition 

workforce was reduced significantly—by more than 50 percent. At the same time, 

DOD’s contracting workload increased by 12 percent. As we reported last month, 

governmentwide reductions in the acquisition workforce along with a number of 

procurement reforms—including an increased reliance on services provided by 

commercial firms, changes to federal acquisition processes, and the introduction or 

expansion of alternative contracting approaches—have placed unprecedented 

demands on the federal acquisition workforce.1

 Underlying these challenges is DOD’s 

need to address serious imbalances in the skills of its remaining workforce and the 

potential loss of highly specialized knowledge as its procurement specialists retire. 

During the last decade, the Congress passed several significant pieces of acquisition 

reform legislation, including the Federal Acquisition Streamlining Act of 1994 and the 

Clinger-Cohen Act of 1996, to provide agency officials with greater flexibility and 

tools to acquire goods and services more efficiently. Today, contracting specialists 

must have a greater knowledge of market conditions, industry trends, and the 

technical details of the commodities and services they procure. The Department of 

Defense, like other federal agencies, has had difficulty adjusting to the significant 

changes in the federal acquisition environment—particularly in regard to improving 

its acquisition of services and ensuring the appropriate use of contracting techniques 

 

1

U.S. General Accounting Office, Federal Procurement: Spending and Workforce Trends, GAO-03-443

(Washington, D.C.: Apr. 30, 2003). 
Page 2 GAO-03-771R Sourcing and Acquisition 

and approaches. As a result, earlier this year we reported that DOD’s contract 

management remains a high-risk area, which we originally designated as such in 

1992.2

While the Congress and the executive branch have looked for ways to streamline the 

acquisition process and generate savings, many of our recent reviews indicate that 

DOD has missed out on opportunities to reduce administrative burdens and enhance 

its acquisition outcomes. For example: 

• DOD contracting officials have not consistently followed established procedures 

for ensuring fair and reasonable prices when using the General Services 

Administration’s (GSA) Federal Supply Schedule to purchase services. 

Specifically, we reported in November 2000 that 77 percent of the orders we 

reviewed, valued at $60.5 million, were placed without seeking competitive quotes 

from multiple contractors, as required by GSA’s procedures.3

 The key reason that 

established procedures were not followed is that many contracting officers were 

not even aware of GSA’s requirement to seek competitive quotes. Also, guidance 

for the program has not been clear. A recent proposed change to the Federal 

Acquisition Regulation should help make distinctions between buying services 

and buying products, and the proposed change should help inform contracting 

officers that competitive quotes should be sought when acquiring services with a 

statement of work. 

• DOD has also been challenged to implement performance-based service 

contracting—an approach to contracting that is intended to achieve greater cost 

savings and better acquisition outcomes. We reported in September 2002 that 

DOD, like other agencies we reviewed, had achieved mixed success in 

incorporating four basic performance-based attributes into its contracts.4

 For 

example, two of the five DOD contracts that it identified as models of 

performance-based contracting did not clearly exhibit all four performance-based 

attributes. Our report also raised concern as to whether agencies have a good 

understanding of performance-based contracting and how to take full advantage 

of it. We recommended that the OFPP Administrator clarify existing guidance to 

ensure that performance-based contracting is appropriately used, particularly 

when acquiring more unique and complex services that require strong government 

oversight. 

• Several reports we have issued since 1999 have indicated that inadequate 

guidance and poor training played a role when DOD personnel did not use sound 

techniques to obtain the best prices for DOD. These situations are largely in areas 

where DOD cannot, or chooses not to, rely on cost-based pricing techniques for 

contracts awarded without competition. For example, in June 1999 we reported 

that in our review of 65 sole-source purchases of commercial items, contracting 

 

2

U.S. General Accounting Office, Major Management Challenges and Program Risks: Department of 

Defense, GAO-03-98 (Washington, D.C.: January 2003). 3

U.S. General Accounting Office, Contract Management: Not Following Procedures Undermines Best 

Pricing Under GSA’s Schedule, GAO-01-125 (Washington, D.C.: Nov. 28, 2000). 4

U.S. General Accounting Office, Contract Management: Guidance Needed for Using PerformanceBased Service Contracting, GAO-02-1049 (Washington, D.C.: Sept. 23, 2002).
Page 3 GAO-03-771R Sourcing and Acquisition 

officers’ price analyses were often too limited to ensure that the prices were fair 

and reasonable.5

 In April 2002, we reported that DOD was waiving the 

requirement for contractors to submit certified cost or pricing data—a key 

requirement meant to ensure that the government has the data it needs to 

effectively negotiate with the contractor in contracts awarded without 

competition.6

 DOD’s guidance was inadequate to help contracting officers 

determine whether a waiver should be granted, what type of data and analyses are 

acceptable, and what kind of expert assistance should be obtained. 

Although we have not evaluated the extent to which reductions in the size of the 

acquisition workforce may have contributed to these results, DOD’s Inspector 

General has identified a number of adverse impacts attributable to reductions in 

DOD’s acquisition workforce. Specifically, in February 2000, the Inspector General 

reported on 

• increased backlogs in closing out completed contracts; 

• increased program costs resulting from contracting for technical support versus 

using in-house technical support; 

• insufficient personnel to fill in for employees on deployments; 

• insufficient staff to manage requirements, reduced scrutiny and timeliness in 

reviewing acquisition actions, personnel retention difficulty; 

• increased procurement action lead time; and 

• lost opportunities to develop cost savings initiatives.7

 

The Inspector General’s report noted that while DOD had improved efficiency in 

contracting through acquisition reform initiatives, concern was still warranted 

because “staffing reductions have clearly outpaced productivity increases and the 

acquisition workforce’s capacity to handle its still formidable workload.” In a May 

2001 report, DOD’s Inspector General concluded that the lack of planning, shortages 

in staffing, and the absence of senior leadership oversight contributed to poor pricing 

analysis and the inappropriate use of waivers in a significant number of contracts 

reviewed.8

DOD is taking a number of actions to address its acquisition challenges. Most of 

these actions are at the early stages, however, and it is uncertain whether they can be 

fully and successfully implemented in the near term. Because effective acquisition 

management plays a key role in creating and sustaining high-performing 

organizations, a critical issue for DOD is whether it has today, or will have tomorrow, 

a workforce with the skills needed to manage DOD’s acquisitions. 

 

5

U.S. General Accounting Office, Contract Management: DOD Pricing of Commercial Items Needs 

Continued Emphasis, GAO/NSIAD-99-90 (Washington, D.C.: June 24, 1999). 6

U.S. General Accounting Office, Contract Management: DOD Needs Better Guidance on Granting 

Waivers for Certified Cost or Pricing Data, GAO-02-502 (Washington, D.C.: Apr. 22, 2002). 7

Department of Defense, Inspector General, DOD Acquisition Workforce Reduction Trends and 

Impacts, Report No.D-2000-088 (Arlington, VA.: Feb. 29, 2000). 8

Office of the Inspector General, Department of Defense, Contracting Officer Determinations of Price 

Reasonableness When Cost or Pricing Data Were Not Obtained, Report No. D-2001-129 (Arlington, 

Va.: May 30, 2001). 
Page 4 GAO-03-771R Sourcing and Acquisition 

Q. Do you view the recommendations of the Commercial Activities Panel as 

a menu from which it is appropriate to pick and choose recommendations to 

implement on a piecemeal basis, or as a cohesive set of principles, which 

should be considered on a comprehensive basis? 

The 12-member Commercial Activities Panel produced two sets of recommendations 

for improving the way federal agencies make sourcing decisions. The first set, which 

the panel unanimously agreed to, consisted of a set of principles to guide sourcing 

policy for the federal government. The panel specifically noted that while each 

principle is important, no single principle stands alone and that the principles were 

adopted as a package. The second set of recommendations was adopted by a twothirds supermajority of the panel. These recommendations involved use of the 

Federal Acquisition Regulation to conduct public-private competitions, limited 

changes to Circular A-76, and the promotion of high-performing organizations across 

the federal government. This set of recommendations was also intended to be 

adopted as a package, rather than on a piecemeal basis. 

Q. The Inspector General of the Department of Defense reported that a 

“consultant’s error in a public-private competition resulted in the award of 

an A-76 contract with potential 10-year value of $346 million to a contractor 

rather than to the lower in-house bid.” Does this episode reinforce the 

recommendation of the Commercial Activities Panel that all parties to a 

public-private competition, including representatives of federal employees, 

should have the same access to the bid protest process to challenge the way a 

competition has been conducted? 

It is quite appropriate for both sides to be able to challenge the results of publicprivate competitions. In fact, public employees, like private-sector vendors, have 

long had the right under Circular A-76 to file an appeal at their agency challenging the 

results of a public-private cost comparison. It is true, though, that only private-sector 

vendors can go on—if they lose an agency-level appeal—to file a bid protest at GAO 

or in court. As your question notes, the Commercial Activities Panel recommended 

that all parties to a public-private competition should have rights as nearly equal as 

possible to challenge the way the competition was conducted, including protest 

rights. The panel noted, however, that granting protest rights should be part of an 

effort to address the full range of issues related to competing for and performing 

government contracts. The panel also recognized that, if a decision were made to 

permit public-sector bid protests of the results of public-private competitions, the 

question of who would have representational capacity to file such a protest would 

have to be carefully considered. 

Q. Would you agree that the challenges of meeting the Administration’s 

goals for public-private competition, and of managing services contracts that 

result from such competition, are more likely to require an increase in 

acquisition resources than a decrease? 

The Administration’s goals for conducting public-private competitions could have a 

significant impact on the acquisition workforce in a number of ways. First, as noted 

by the Commercial Activities Panel, the current process for conducting these 
Page 5 GAO-03-771R Sourcing and Acquisition 

competitions is complicated, and therefore requires a skilled acquisition workforce to 

support the studies. Any changes to the process will require additional resources for 

training and perhaps additional personnel. Second, the number of positions proposed 

for study in the coming years is significantly higher than in the past, greatly 

increasing the competitive sourcing workload at many agencies. At DOD, for 

example, the number of positions proposed for study during the next 5 years is 

double what the department has been able to review over the between fiscal years 

1997 and 2002. Civilian agencies, which have not conducted nearly as many publicprivate competitions as DOD, will face even greater challenges in building the 

necessary infrastructure to conduct these competitions.9 Finally, to the extent that an 

increase in competitive sourcing studies results in an increase in the award of service 

contracts to the private sector, agencies will need to ensure that they have a 

sufficient acquisition workforce in numbers and abilities to administer those 

contracts effectively. In this regard, the private sector historically has won half the 

public-private competitions. 

- - - - - 

We are sending copies of this report to the Administrator, Office of Federal 

Procurement Policy; the Director, Defense Procurement and Acquisition Policy; and 

interested congressional committees. We will also make copies available to others 

upon request. In addition, this report will be available at no charge on the GAO Web 

site at http://www.gao.gov. 

If you have any questions about this letter or need additional information, please call 

me or Jack Brock, Managing Director, Acquisition and Sourcing Management, on 

(202) 512-4841. Key contributors to this letter included Vijay Barnabas, Ralph Dawn, 

and Karen Sloan. 

David M. Walker 

Comptroller General 

of the United States 

 

9

 The costs for additional training or personnel needed to conduct public-private competitions could be 

offset, of course, through the savings realized from conducting the competitions. 

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